BlueVine: Bringing Invoice Factoring Into A New Age

BlueVine is trying to make invoice financing more streamlined and with less friction than existing services. During invoice factoring, a company typically sells invoices (future payments from clients based on specific work or services that the firm has performed or ordered) in exchange for immediate cash provided by the factor company. The factor company pays less than the face value of invoices being factored, often 80 to 95%. However, many small companies don’t like traditional factoring for a variety of reasons including the following:

Customer relationship issues. Often times, the invoice payee must pay the factoring company. This process involves the factoring company contacting the client and requesting them to redirect the payment to the factoring company. Also, In the event that the invoice doesn’t get paid in a timely fashion, the factor ing company may get involved in collections.

The financial commitment. Some factoring firms require that their clients factor a certain minimum $ amount of invoices with them per month, regardless of their need for funds.

The hidden and convoluted fees. Small businesses are often surprised by due diligence charges, invoice processing fees and/or complex fees structure.

The paperwork hassle. Factoring often involves long applications, also scanning and sending over invoices by email/fax on ongoing basis.

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Eyal Lifshitz, the founder and CEO of BlueVine, believes that his firm is building an invoice factoring service that appeals to a broader audience, especially one that is already accustomed to getting many of their services online in a quick and easy fashion.

How BlueVine Works:

1) A company applies for a Bluevine account. To apply, the company has to be US based with US clients, and do their accounting through QuickBooks,, XeroXero, or FreshBooks. (When asked, he estimates around 50% of the companies that get apply get accepted.).

2) The company selects which invoices they want to receive immediate cash advance For the invoices a company wants to fund, they must change the payment information. BlueVine gives each company a unique bank account number and P.O. Box. The check or electronic transfer is still sent in the name of the company and not BlueVine.

If a client sends additional payments to the account, BlueVine will match the payment to the relevant invoice/s and forward the money to the company. This avoids having to constantly change payment info.

3) BlueVine provides 85-90%-90% of the value of the invoices to the company upfront, and the rest minus fees when the invoice gets paid. upfront, and the rest minus its fees when it gets paid by the invoice.

4) When the invoice gets paid, the company receives back the payment minus BlueVine’s fees. Eyal points out that the total payment to a company for very short-term invoice after fees are deducted could be as high as 98.5% of the invoice’s face value. (i.e. 85% upfront and 13.5% when the invoice is paid).

If the invoice is not paid on time, BlueVine will provide a grace period of three weeks (during which additional fees accumulate). At which point, BlueVine will require that the company buyback the invoice for the unpaid balance plus BlueVine’s fees.

How much does BlueVine Cost?

BlueVine charges between 0.5% to 1.0% discount fee on the invoice value per week. This equals an APR of 28 – 58%. When I questioned Eyal about this being a very high APR, he responded in the following way:

APR is very misleading in the case of BlueVine, where clients choose when and which invoices to fund. Most invoices being factored have very short durations. In other words, short-term financing can be accomplished with a high level of precision via BlueVine. This avoids companies having to take out loans for bigger amounts or longer period than needed, lowering the total $ amount of interest . He gave the example of a company needing $3,000 for 4 weeks to make up for a short-term gap in cash flow. The cost of BlueVine’s service would be $60 – $120 and getting the invoice funded would only take a few minutes to process. While the headline APR might look high, the true cost to business is actually very low.

Eyal also pointed out that the BlueVine solution was in fact much cheaper than a merchant cash advance (where the APR can be over 100%), and many short-term non-bank working capital loans. He readily admitted that bank financing, if available, is much cheaper. However, bank financing is difficult to obtain, and not generally available for small dollar amounts.

Who does BlueVine serve?

BlueVine has hundreds of customers. Customers tend to provide services or products to other businesses (i.e. B2B) and come from a wide range of industries including – Business and Professional Services, Staffing and HR, Marketing agencies, Manufacturers and distributers, etc] which do under $1.5 million in revenue per year. Clients can have below average (from 500) to great personal and business credit. A typical client may fund $10,000-$50,000 in invoices at a time.

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Eyal Lifshitz, the founder and CEO of BlueVine

Eyal co-founded BlueVine to give small businesses a quick and simple way to access capital. As a third generation small business entrepreneur, he is passionate about helping small businesses grow and prosper. Before BlueVine, Eyal was a Principal at Greylock IL, a leading venture capital firm. At Greylock, Eyal was involved in investing over $100 million in capital in companies such as Just-Eat (online delivery platform for restaurants) and iZettle (credit card processing for small businesses). Earlier in his career, he was a consultant at McKinsey & Company and an engineer at Texas Instruments. Eyal currently lives in Palo Alto, California with his wife and 2 kids. He holds an MBA with high honors from the University of Chicago, where he was a Carlton Fellow.

About the Author

Marc Prosser has been involved in many businesses as an executive, advisor, and investor. Prior to starting his own company, Marc Prosser was the first employee and Chief Marketing Officer of FXCM. During his ten years at FXCM, the company grew from a small business to over 700 employees.

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Comments (6) • Likes (0) Disclaimer: Reviews on FitSmallBusiness.com are the product of independent research by our writers, researchers, and editorial team. User reviews and comments are contributions from independent users not affiliated with FitSmallBusiness.com's editorial team. Banks, issuers, credit card companies, and other product & service providers are not responsible for any content posted on FitSmallBusiness.com. As such, they do not endorse or guarantee any posted comments or reviews. LikeAsk a Question

I used BlueVine for about 1 month and their rule is not have any rules whatsoever. There are no terms and conditions explicitly provided to their customers. They make up new rules as it goes. They do interfere with a company-client relationship contrary to the no notification that they claim to use. They are extremely paranoid abt scams, so they will definitely interfere with your client relationship. Their customer service is pathetic as they hire 20s something to provide customer service, thus their customer service is very poor. Without any policies, rules and regulations provided to customers up-front, I can predicted they will being facing stiff legal liabilities in the future.

Considered factoring for aged receivables (bad debt) only, not for current invoicing. In a service industry, it is not recommended for customer service relations and issues. Factoring increases problems, as if the business now works for factoring company. There are much better ways and management tools to use than factoring for cash flow. Too expensive. When a business looks at factoring, the business is already hurting. Factoring increases pain, in my opinion. But businesses are doing it, I think out of ignorance.

Hi Michele, If you factor invoices that will not be paid or paid within 90 days, you will end up owing the factor for the cash advance plus their fees. However, what ways do you suggest that a company improves cash flow? Best, Marc

I used a factor in my business. I I believe they are disgusting and corrupt. They stab U in the back, interfere with conducting my business, cost me customers and literally forced me out of business and resulted in having to declare personal bankruptcy. And their interest rates are exorbitant to top it off. The company I used was BUSINESS ALLIANCE CAPITAL CORPORATION!

Ronald, I am sorry for your terrible experience and hope your on your way to financial recovering.. Please not the company that he is discussing is not BlueVine. There are 725 factoring companies in the United States and there are bound to be a few bad apples. My impression is that BlueVine is more transparent in its pricing and cheaper than many other micro factoring companies. Best, Marc Prosser

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